Here are some things you should know about investing in stocks:
It doesn’t have to be complicated
investing in induvidual stocks understanding all the fundamentals can be confusing however it doesn’t have to be like this you can invest in an elf or index fund which is a collection of stocks usually in a geographical location scubas the us, I would recommend to start out ,just creating a globally diversified index fund portfolio this will be very stable, give you good growth and is very easy to understand.
Choose the right account for you and your goals
There are multiple account type what you choose will depend on you here’s what I would suggest:
scenario 1- want ability to retire/withdraw money before pension age:
invest in tax efficient non retirement account (in the uk this will be a stocks and shares isa)up to its limit.
and invest anything over the limit in a standard brokerage.
scenario 2- saving for retirement :
Firstly ensure your maximising a company pension if you are able to.
invest in a tax efficient retire meant account (in the uk this is a SIPP) upto its limit
Invest any additional money into further tax effect accounts and if you still have money left over invest the rest of your stock and share budget into a standard account.
Essentially ensure you’re being as tax efficient as you can be, if your after the money for retirement go for a retirement account and if not then choose the next most tax efficient standard account.
Choosing your strategy
like I suggest I would personally I would recommend investing in index funds for most people however there are more strategies you can looking into like growth stock investing and dividend investing where you essentially choose stocks based on attributes which suit your goals I would recommend if you want to do this kind of investing reading multiple books and watching a lot of videos to understand fully how you will do it as its more than I can write in this section.
How you make money in stocks
you make money in stocks in two main ways:
capital growth-this is the stock price going up as demand for the stock increases this means that if you were to sell the stock the difference between the price it is now and the price you brought it for is you profit (assuming there’s no fees involved)
Dividends- not all stocks give out dividends however dividends are money the company gives out to reward there share holders typically this is around 3% of the amount of capital you hold as the stock price increases this is also likely to increase however its important to remember that dividends can be cut at any point if profits for the company start to drop for example, but this is usually fairly rare.
Don’t invest for the short term
Its no secret that the stock market can fluctuate a lot for this reason I don’t advise you use the stock market to save for the short term as you could potentially loose 10-20% in a night and if you need the money at that point its not gonna be good for you, I would instead suggest you use it as a second retirement or if you really wanted to use it to save for example for a rental property that’s fine but just be aware that you should be flexible with when you are going to withdraw the money.
Not investing is risker than investing
Im sure you are all familiar with the the concept of inflation essentially everything gets more expensive every year so money you have sitting around starts to loose its value the reason I say not investing is risky is because without investing my you are gaurnteeing that you are going to loose the value of your money whereas money invested correctly will make you a good return overtime 9 time out of 10.
Buy as often as you can
I suggest if you wan to invest you should consider investing as frequently as you can this just so you can get a better average of the markets lows swell as the highs if you can good practice would be invest everyday the market is open but once a month is what I would suggest for most people as its easy to manage for most people.